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Shareholders threaten to revolt as Metro Bank give top bosses pay increases

By Nagasunder in UK Business News, posted April 10, 2023

Metro Bank faces a shareholder revolt over CEO compensation after a major investor advisory company warned the high street lender failed to explain a "significant" 20 percent pay increase for top executives.

Glass Lewis, which advises shareholders, such as large pension funds and asset managers on how to vote at annual general meetings, urged investors to vote against the bank's remuneration report due to concerns about rising pay for the bank's CEO Daniel Frumkin, and the newly appointed CFO James Hopkinson.

Glass Lewis said: “Absent a sufficiently compelling rationale, we cannot recommend that shareholders support this proposal at this time.”

It comes after Metro Bank awarded Frumkin a 20 percent raise in his basic salary, claiming that his remuneration was "increasingly out of line with others in the market" and that he was playing a critical role in recovering the bank's fortunes after an accounting crisis rocked it in 2019.

While Frumkin has waived the one-year raise, which will take effect in January 2024, it will raise his base salary from £769,600 to £925,000 next year. Frumkin was paid £1.3 million, including bonuses, for 2022.

Glass Lewis observed that the 20 percent raise was substantially over the typical 5 percent raise provided to employees in 2023.

The company said: “Glass Lewis views high, fixed pay rises with scepticism, as such remuneration is not directly linked to performance and may serve as a crutch when performance has fallen below expectations."

It added that large increases in base salaries can have a “compounding effect” on executive pay since bonuses are often granted as a percentage of base salaries.

The proxy business also expressed concerns about Hopkinson, Metro Bank's new chief financial officer, who started in September on a £500,000 base salary, roughly 24 percent greater than his predecessor's.

Metro Bank defended the selection, claiming that there was a significant demand for chief financial officers with experience in turning round a bank's performance since the 2019 crisis and that Hopkinson had a great track record, having previously worked at lenders such as Standard Chartered.

Glass Lewis acknowledged Hopkinson's experience but claimed Metro Bank failed to present a "thorough and convincing explanation" for raising pay at the start of his term, rather than over time and based on performance.

It said: “We would generally expect to see incoming executives appointed at a discount relative to their predecessors, with any significant salary increases occurring on a phased basis, concomitant with experience in the role and at the company,”

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Metro Bank said: “Both awards are consistent with the remuneration policy approved by shareholders.”

Barclays is also facing a shareholder revolt over long-term incentives for former CFO Tushar Mozaria, who was in control when the bank sold billions of pounds of US securities it was not licenced to sell, culminating in a US penalties.

While Barclays docked his pay, Glass Lewis said it did not go far enough.

It added: “We believe shareholders could reasonably have expected the committee to further reduce this award to better reflect the financial and reputational impact of the risk and control issues over the period."

Source: The Guardian